Business

Why Are People Still Buying CDs?

Amazon announced AutoRip on Thursday, a free service that gives consumers a cloud-based backup for every CD they've bought from the company since 1998.

For Amazon, it's another move towards ensuring that consumers consider the company their primary stream of content, whatever the format. However, the introduction of the service raises another question: Why are people still buying CDs in 2013? After all, most music is available online in a format that's usually cheaper than CDs and doesn't take up shelf space.

Yet, the CD is still the predominant format for music buying. Consumers bought 193 million CDs in 2012 vs. 118 million digitally downloaded albums, according to Nielsen SoundScan. Though digital continues to grow at a rapid clip, it will probably be a couple of years before CD buyers become the minority. There's also reason to believe that CDs will still hold a significant share of the market for some time.

Sound quality

Though there's some debate on the issue, David Bakula, SVP of client development for Nielsen, believes that the sound quality of downloaded music isn't on par with music on a CD. However, it's worth noting that the quality of older CDs may actually be worse now than a decade or so ago thanks to the so-called Loudness War that prompted engineers to apply a high rate of compression to old recordings to make them louder.

If you live on either coast or in a major city, you may get the impression that everyone is on Spotify and has an iPhone. However, there are only two markets — Hawaii and San Francisco — in which people download music more than they buy CDs, according to Nielsen. Meanwhile, there are markets and genres in which CD buying is the norm. A couple of analysts mentioned country music as a genre in which the majority of purchases are still via CD. "Country fans are still going to big chains [to buy music]," says Glenn Peoples, senior editorial analyst at Billboard.

"The majority of music buyers purchase CDs and don’t buy digital so there’s a large non-digital population," says Russ Crupnick, SVP of industry analysis for The NPD Group. "They simply never had the need or motivation to buy digital downloads."

Bakula also noted that in 1994, when CDs had been out for a few years and had come down to mainstream pricing levels, cassettes still claimed 40% of the market.

Cars

People still listen to a lot of their music in their cars, which are still adapting to the digital changes. "As long as cars have CD players, there's a market for them," says Crupnick.

Tangibility

Bakula notes that CD sales always spike in the fourth quarter because you just can't wrap a download. As Peoples also notes, up-and-coming bands still like to hand out or sell CDs at gigs rather than merely direct users to a URL. "Market research shows people buy CDs out of habit," Bakula says. "They also buy when they really like the artist. They want a physical package with the artwork. CDs offer that offer a kind of connection with the artist." Crupnick agrees: "Uber fans like to have the physical version in addition to/instead of digital for artists where they have a strong affinity."

What do you think? Are you still buying CDs? Are you still mystified that other people do? Let us know in the comments.

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